McGraw-Hill © 2000 The McGraw-Hill Companies 1 S M McGraw-Hill © 2000 The McGraw-Hill Companies

McGraw-Hill © 2000 The McGraw-Hill Companies 2 S M S M McGraw-Hill © 2000 The McGraw-Hill Companies Chapter 1 INTRODUCTION TO SERVICES

McGraw-Hill © 2000 The McGraw-Hill Companies 3 S M A note on the PowerPoint Slides... These PowerPoint slides contain selected exhibits, figures and tables from the chapters as well as objectives for the chapters. For many chapters, we include extra lecture slides and in-class exercises that we have compiled and used in our classes. The lecture slides are not intended to provide full outlines or complete lectures for the chapters, but rather may be used selectively to enhance class sessions.

McGraw-Hill © 2000 The McGraw-Hill Companies 4 S M Objectives for Chapter 1: Introduction to Services Explain what services are and identify service trends Explain the need for special services marketing concepts and practices Outline the basic differences between goods and services and the resulting challenges for service businesses Introduce the service marketing triangle Introduce the expanded services marketing mix Introduce the gaps model of service quality

McGraw-Hill © 2000 The McGraw-Hill Companies 5 S M Challenges for Services Defining and improving quality Communicating and testing new services Communicating and maintaining a consistent image Motivating and sustaining employee commitment Coordinating marketing, operations and human resource efforts Setting prices Standardization versus personalization

McGraw-Hill © 2000 The McGraw-Hill Companies 6 S M Examples of Service Industries Health Care –hospital, medical practice, dentistry, eye care Professional Services –accounting, legal, architectural Financial Services –banking, investment advising, insurance Hospitality –restaurant, hotel/motel, bed & breakfast, –ski resort, rafting Travel –airlines, travel agencies, theme park Others: –hair styling, pest control, plumbing, lawn maintenance, counseling services, health club

McGraw-Hill © 2000 The McGraw-Hill Companies 7 S M Figure 1-1 Tangibility Spectrum Tangible Dominant Intangible Dominant Salt Soft Drinks Detergents Automobiles Cosmetics Advertising Agencies Airlines Investment Management Consulting Teaching Fast-food Outlets Fast-food Outlets

McGraw-Hill © 2000 The McGraw-Hill Companies 8 S M Figure 1-2 Percent of U.S. Labor Force by Industry Percent of GDP Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): Year Services Manufacturing Mining & Agriculture

McGraw-Hill © 2000 The McGraw-Hill Companies 9 S M Figure 1-3 Percent of U.S. Gross Domestic Product by Industry Percent of GDP Year Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): Services Manufacturing Mining & Agriculture

McGraw-Hill © 2000 The McGraw-Hill Companies 10 S M Differences Between Goods and Services Intangibility Perishability Simultaneous Production and Consumption Heterogeneity

McGraw-Hill © 2000 The McGraw-Hill Companies 11 S M Implications of Intangibility Services cannot be inventoried Services cannot be patented Services cannot be readily displayed or communicated Pricing is difficult

McGraw-Hill © 2000 The McGraw-Hill Companies 12 S M Implications of Heterogeneity Service delivery and customer satisfaction depend on employee actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted

McGraw-Hill © 2000 The McGraw-Hill Companies 13 S M Implications of Simultaneous Production and Consumption Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult

McGraw-Hill © 2000 The McGraw-Hill Companies 14 S M Implications of Perishability It is difficult to synchronize supply and demand with services Services cannot be returned or resold

McGraw-Hill © 2000 The McGraw-Hill Companies 15 S M Table 1-2 Services are Different Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985):

McGraw-Hill © 2000 The McGraw-Hill Companies 16 S M Figure 1-5 The Services Marketing Triangle Internal Marketing Interactive Marketing External Marketing Company (Management) CustomersEmployees “enabling the promise” “delivering the promise” “setting the promise” Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

McGraw-Hill © 2000 The McGraw-Hill Companies 17 S M Services Marketing Triangle Applications Exercise Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle? How is each type of marketing being carried out currently? Are the three sides of the triangle well aligned? Are there specific challenges or barriers in any of the three areas?

McGraw-Hill © 2000 The McGraw-Hill Companies 18 S M Ways to Use the Services Marketing Triangle Overall Strategic Assessment How is the service organization doing on all three sides of the triangle? Where are the weaknesses? What are the strengths? Specific Service Implementation What is being promoted and by whom? How will it be delivered and by whom? Are the supporting systems in place to deliver the promised service?

McGraw-Hill © 2000 The McGraw-Hill Companies 19 S M Source: Adapted from A. Parasuraman Company Customers Providers Technology Figure 1-6 The Services Triangle and Technology

McGraw-Hill © 2000 The McGraw-Hill Companies 20 S M Services Marketing Mix: 7 Ps for Services Traditional Marketing Mix Expanded Mix for Services: 7 Ps Building Customer Relationships Through People, Processes, and Physical Evidence Ways to Use the 7 Ps

McGraw-Hill © 2000 The McGraw-Hill Companies 21 S M Traditional Marketing Mix All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services: Product Price Place Promotion

McGraw-Hill © 2000 The McGraw-Hill Companies 22 S M Expanded Mix for Services -- the 7 Ps Product Price Place Promotion People Process Physical Evidence

McGraw-Hill © 2000 The McGraw-Hill Companies 23 S M Table 1-3 Expanded Marketing Mix for Services

McGraw-Hill © 2000 The McGraw-Hill Companies 24 S M Table 1-3 (Continued) Expanded Marketing Mix for Services

McGraw-Hill © 2000 The McGraw-Hill Companies 25 S M Ways to Use the 7 Ps Overall Strategic Assessment How effective is a firm’s services marketing mix? Is the mix well-aligned with overall vision and strategy? What are the strengths and weaknesses in terms of the 7 Ps? Specific Service Implementation Who is the customer? What is the service? How effectively does the services marketing mix for a service communicate its benefits and quality? What changes/improvements are needed?